Brighter Jobs Picture, Deals Fuel Retail July Sales

By
A A A

Savory deals and a brighter job picture prompted shoppers to spend more freely in July, leading to solid sales gains for retailers, it was reported on Thursday.

But the jury is still out on how retailers will fare during the back-to-school shopping season, which moves into high gear this month.

July sales at stores open at least a year rose 4.8% vs. a year earlier, according to Ken Perkins, president of Retail Metrics.


Analysts were expecting a 4.5% gain.

Perkins says he wasn't surprised at the results, given that they were roughly in line with expectations.

An "encouraging and positive development," he said, is that apparel retailersL Brands ( LB ),Buckle ( BKE ),Cato ( CATO ),Gap ( GPS ) andZumiez ( ZUMZ ) posted better-than-expected July results.

'Modest' Gains

Perkins sees only "modest sales gains" for clothing retailers in back-to-school and the latter half of the year amid heavy competition and promotions.

"I expect apparel sales to be sluggish through the second half unless the fashion really turns around," he said.

Recent surveys don't bode well for apparel retailers. The surveys suggest that apparel ranks below electronics and school supplies as priorities for back-to-school purchases, Perkins says.

He expects overall back-to-school selling to be promotional, with the industry showing modest sales gains in the low single digits.

"The state of the consumer mindset is one of caution," Perkins said. "The consumer is deal-oriented and value-focused and really looking for the ability to shop whatever is most convenient for them -- whether in stores, mobile, desktop or tablet -- and be able to pick it up in the store or have it shipped to their home."

Perkins doesn't see any catalyst that would cause a "significant spike" in consumer spending for the back-to-school season and the back half of the year.

"The jobs market has improved, but wages have yet to follow suit," Perkins said. "Until they do, higher spending levels are unlikely, and there will be more of the same sluggish slow (spending) growth."

Michael Niemira, a consultant with the International Council of Shopping Centers, is more upbeat about the back-to-school shopping season and the retail outlook overall.

"We're starting to see a somewhat better economic performance, and the labor markets have improved, with the jobless claims looking much more healthy," he said. "All that bodes well for the near term, and it particularly bodes well for the back-to-school season."

He calculates that retailers posted a 4.8% rise in July same-store sales.

Based on recent results from the ICSC-Goldman Sachs weekly chain-store sales index, early back-to-school buying looks strong, said Niemira: "I suspect that (strength) will play out for the month of August as a whole."

He sees August same-store sales rising 4% to 5% from a year earlier, and he projects total July, August and September sales of back-to-school items such as electronics and family clothing to be the strongest since 2010.

Most retailers reporting monthly fared well in July.

Perkins calls the showing "decent."

He added: "Clearly, promotions were pretty robust throughout the month, providing incentive for consumers to shop. The weather was decent throughout the month, and the job market has been improving, though wage gains have not been what we'd like them to be."

Wait And See

Perkins adds that July is not a key month for the second quarter, since retailers are focused on clearing out summer goods to make room for early fall and back-to-school merchandise.

"We will see how they do in August," he said.

Like Niemira, Perkins estimates that August same-store sales will rise 4% to 5% vs. a year earlier.

Victoria's Secret parent L Brands led the pack in July with a hefty 6% gain in same-store sales for the month, well ahead of forecasts for a 1.8% increase.

The company also said it expects to report second-quarter earnings at the high end of its previous guidance of 57 cents to 62 cents a share.

Warehouse club giant and typical top performerCostco (COST) posted a 5% rise in July same-store sales, slightly short of views for a 5.2% gain.

Still, Perkins called it an "excellent" month for Costco, which has surprised on the upside the past several months.

Meanwhile, apparel chain Gap posted a 2% rise in July same-store sales, ahead of views for a 0.6% gain.

Value-priced apparel retailer Cato saw a 4% gain in July same-store sales, topping forecasts for a 1.5% increase.

Action sports retailer Zumiez turned out a 3.5% rise in July same-store sales late Wednesday, well ahead of forecasts for a 2.8% gain.

Perkins said Zumiez is "best placed" among the publicly traded teen-apparel retailers to perform the best for back to school.

He cites the fact that the other teen-apparel retailers -- includingAeropostale (ARO),American Eagle Outfitters (AEO) andAbercrombie & Fitch (ANF) -- are expected to post a decline in same-store sales for the second quarter.

Teen-apparel outfit Buckle logged a 0.5% rise in July same-store sales, sailing past views for a 0.7% decline.

Drugstore giantWalgreen (WAG) posted a 5.2% gain in July comps on Tuesday, in line with forecasts.

Last week, rivalRite Aid (RAD) reported a same-store sales increase of 4.6% for July, beating views for a 3% gain.

On the downside, regional discount chainStein Mart (SMRT) saw a 0.8% rise in July same-store sales, well below estimates for a 4.2% increase.

PriceSmart (PSMT), which owns and operates U.S.-style membership shopping warehouses in Latin America and the Caribbean, posted a 1.8% increase in July same-store sales, slightly short of views for a 2% increase.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Investing Ideas

Referenced Stocks: LB , BKE , CATO , GPS , ZUMZ

Investor's Business Daily

Investor's Business Daily

More from Investor's Business Daily:

Related Videos

Stocks

Referenced

Most Active by Volume

105,668,238
  • $16.69 ▼ 1.48%
51,051,053
  • $8.29 ▲ 1.10%
50,476,494
  • $5.62 ▲ 0.18%
45,957,548
  • $18.20 ▼ 0.66%
45,849,373
  • $125.69 ▼ 0.25%
44,297,979
  • $17.25 ▼ 3.31%
43,161,110
  • $107.97 ▲ 0.25%
42,828,521
  • $29.90 ▼ 0.47%
As of 7/7/2015, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com